3. I choose not to deal with an outfit which deducts an annual fee but does not have the gumption to show subtraction of the fee on statements. Seven out of ten people who own funds do not even realize they are paying hundreds of dollars a year in recurring annual (MER) fees. 4. With so many funds, it's easier to pick a good stock than a mutual fund. 5. Managers of funds do not really care about taxes because the burden to pay falls on unitholders, not upon them. Mutual fund managers buy and sell. In contrast, holding good stocks with increasing dividends defers income taxes on the gains. 6. If you do find a fund that has beaten the averages for a few years, this does not guarantee that the fund will outperform again. 7. By their very nature, funds can't profit from stock selectivity: they overdiversify often by owning hundreds of different companies. 8. The short-term focus of money managers and pressure from unit holders for immediate performance are obstacles to long term growth. 9. “Most mutual fund managers are so young they have no historical reference on which to base their asset allocation decisions.” Geraldine Weiss, I Q Trends First-September, 1997

10. Most funds lack the cash reserves to pay off the massive redemptions which will follow a market panic. 11. When the shakeout comes and fund owners clamour for redemption, mutual fund shares will go down faster and farther than stocks which are supported by their dividends. 12. I have no control over when capital gains are realized. 13. Most mutual funds have a high turnover rate: this means higher taxes for investors. 14. Funds results are sometimes overstated because market lagging mutual funds are shut down. (Forbes, Feb 23, 1998) 15. Owning a mutual fund can result in you paying income taxes on other peoples' capital gains. 16. Eventually the performance of all funds will regress to the mean. 17. The mutual fund ratings are mostly backward-looking. 18. Fund marketing is often misleading. Sometimes, for instance, they imply that no-load means no fees. 19. A mutual fund could be liquidated, without notice, when the unit value is low. 20. Money in funds is not covered by Canada Deposit Insurance Corporation. 21. Fund managers can change without notice. 22. I do not wish to make a financial planner rich. 23. Loads reduce the return on funds. 24.Mutual funds are not noted for generating income. 25.The long term effect of mutual fund fees is devastating. According to William M. Merser Ltd. $1,000 invested in a fund earning 8% annually over 25 years would give you$6,850 before the annual fee. With a MER of 2% a year, you end up with only $4,290. You lose $2,560 or 37% of your end capital. They abscond with one third of your money…2% a year adds up. (Globe and Mail - Report on Business - May 8, 1999 Link back to front page index 26. Mutual fund transaction costs are a dead weight that inevitably will lead funds to trail the market. Actively managed funds can turn over 150% of their portfolio each year. (Barron's May 10, 1999) 27. “The art of persuasion has crowded out the art of performance.” Common Sense on Mutual Funds by John Bogle, founder of the Vanguard Group, (Wiley, $38.95) 28 It's more profitable, often, to own shares of fund managers like CIX, AGF or Investors Syndicate than to hold the funds they manage. 29. Control of funds is effectively in the hands of the management company because fund investor are so numerous and spread out. There is a profound conflict of interest between fund managers and investors. 30. Mutual funds are just an entry-level, mass-marketed way to invest. 31. Unit holders have to pay the management fees even if the managers underperform. 32. Deferred sales charge (DSC) penalties effectively mean you have made a six year commitment. 33. “Many fund companies are reluctant-or flatly refuse-to publish the names of their investment personnel.” Financial Post June 19, 1999 pE1

34. ”…many fund managers would be more accurately described as traders rather than investors. ” Financial Post Aug28, 1999 p.C4 35. Fund managers almost invariably buy at market tops. They never have money to buy when stock prices are really down. Timing the Stock Market by Colin Alexander (McGraw Hill, 1999) 36. I can't get a tax receipt for the fees charged against my account. 37. Fund managers come and go with alarming frequency and the funds try to hide this fact. 38. I'd much rather select my own dividend-paying stocks then get a grab-bag with riskier stocks I might not want to own. Some funds, for instance, held Bre-X. 39. When a fund is forced to sell stock to meet redemption demands, trading costs are borne not by the departing unitholders but by the unsuspecting souls who remain in the fund. 40. “The supply of stars [to run funds] has all but dried up” Gordon Powers Oct 30, 1999 Report on Business 41. “Desperate to do well in quarterly and monthly rankings, [mutual fund] managers take risks. “Kelly Rodgers, CFA, MoneySense November 1999 p.23 42. “Mutual fund managers have no apparent superiority in skill or performance over other institutional money managers.” Kelly Rodgers, CFA, MoneySense Nov. 99 p.23 43. Toward year end, many fund managers window dress: they buy winning stocks at too high a price so their portfolios will look good in the annual printed report and sell losing stocks at low prices for the same reason. Do you really want these managers working for you? 44. Most funds are condemned to ho-hum performance because they are constrained by industry representation guidelines. “Some portfolio managers whose portfolios are underweighted in a hot sector chase high prices, just to secure sufficient representation. As I see it, these money managers bought stock they should have been selling.” John Neff on Investing p102 45. Most fund managers receive greater inflows of money in a rising market and are pressured to buy stocks rather quickly…at high prices…lest they underperform their competition and lose their jobs. 46. Some funds have had their prospectuses altered so they can use the futures market to create synthetic cash. Barron's Jan 24th 2000

47. Regulators block funds from having more than a certain percent of the fund in any one company. Report on Business Feb 7, 2000 48.”risk control has come to mean not controlling the client's principal risk, but controlling the managers' career risk.” John Bogle - Risk in an Era of Confidence - April 2000 49. I'm concerned about “style drift”. For instance, growth managers not being able to buy value stocks. 50. Most funds are no longer balanced: many don't hold bonds, for instance. 51. “In the last year alone, all-industry costs absorbed an estimated $120 billion of the returns earned by mutual fund shareholders-an astonishing figure.” John Bogle, April 6, 2000 52. “With its 90% portfolio turnover, the fund industry has chosen short [term speculation].” rather than long term investing. John Bogle - Risk in an Era of Confidence - April 6, 2000 53. “studies of mutual fund performance have found that although there is some tendency for mutual funds that have done well to continue to do so, the tendency is weak and short-lived. “Robert J. Shiller, Irrational Exuberance p.198 54. “You might wonder if those lofty management fees suggest a better-managed fund that will ultimately earn you more. It really seems to be unrelated.” Fortune May 15, 2000 Fund Fees p.462 55. Like John Bogle, I'm skeptical: I just don't believe “any [bond] fund manager could consistently forecast interest rates with accuracy, and thus significantly outpace the famously efficient bond market over the long run.” bogle_site/ march092000 p5 56. Funds have failed to share the economies of scale with the investors they are responsible for serving. 57. “mutual funds, ever searching for the market's sweet spots, turnover their portfolios at an astonishing rate of 90% per year-clearly short-term speculation, not long-term investing. The cost of executing these transactions came to an estimated 0.7% per year. (Funds don't disclose this hidden cost.)” John Bogle Jan 5, 2000 vanguard.com/bogle_site/ 58. ”…very few equity funds have provided their shareholders with anything like the generous returns offered by the market.” John Bogle Jan 5, 2000 vanguard.com/bogle_site 59. I like to invest for the long term. “This year, for the first time in memory, more funds are being liquidated or merged out of existence than created. That trend is likely to accelerate.”The Economist May 20, 2000 p.95 60. Return figures are only independently audited once a year. 61. Few funds have incentives for exceptional performance by managers nor penalties governing dismal returns. 62. I don't want to get caught by this bear market: ”…we'll see absolute slaughter in that dinosaur industry, mutual funds.” Richard Russell Barron's June 12, 2000 63. “High closing” may be a common industry practice to gee up returns. “Many [funds] routinely post strong gains on the final day of the year” Report on Business July 5, 2000

64. Fund performance is susceptible to the movement of hot money - investment dollars that move from place to place seeking short term gains.

65. “The most compelling reason not to buy a fund is when its investment policies and objective are incompatible with or not suited to your own.” Investment Guide, August 31, 2000 66. Some managers have too much leeway in controlling fund assets. They can suddenly change gears and you might not know about it. 67. When you invest in mutual funds, you surrender control. By control, we mean the ability to plan with certainty when you'll get your money back” Peter Brewster, Investor's Digest March 17, 2000

68. Some funds have misleading names - names which suggest they hold certain types of investments when, in fact, a large percent of assets are in other types of securities.

69 ”…spin and hype mask the true performance of a mutual fund” Arthur Levitt, chairman, SEC 70 “the mutual fund industry is an expensive home for the long term investor” Bogle's example: the final value of $1,000 invested in S&P in 1950 should be $514,00 but is only $193,000 after fees. John Bogle, Toronto, December 2000 71. “Advertising expenses (usually pumping high-and unsustainable-returns) are paid by fund shareholders. John Bogle, Toronto December 4, 2000 72. “there's simply no evidence that funds have been successful at market timing” John Bogle 73. “Style drift” leaves many funds larded with stocks I'd rather not own. 74. The fund I own could be shut down and the liquidation could cost a bundle. In 1998, 222 funds went out of business in the States. 75. The mutual fund industry argues that, ” by pooling money, funds offer investors an efficient way to venture into the markets.” However, many* “funds have committed the cardinal sin of padding their profits by raising their fees at a time when their asset base is growing.” Barron's Feb 26, 2001 *According to Morningstar, 260 funds in the past three years.

76. “During the period 1993-2000, the total return on Morningstar's top-rated U.S. funds averaged +106%, vs +222 for the stock market (the Wilshire 5000 Equity Index).” John Bogle before the Financial Analysts, February 15, 2001 If the top-rated funds don't beat the market, which funds will? 77. “Nor have I ever seen any methodology by which tomorrow's stars [investors] can be identified in advance.” John Bogle 78. Mutual funds, typically, don't buy insurance in high markets by going to cash. 79. The mutual fund industry is more interested in fad-following marketing than management. 80. I heard that India's biggest and oldest manager of mutual funds, Unit Trust of India, has shed its middle name, and, more importantly, suspended (as of July 2, 2001) sales and purchases of its units. Could it happen here?

81. The Investment Company Institute (America's mutual fund lobby group) tries to fight off fee disclosure requirements on Capitol Hill. WSJ Nov26 2003 82. “Most funds underperform the markets, overcharge investors, create tax headaches and suffer erratic swings in performance.” Jason Zweig, Time July 6, 2003 83. “The overriding factor ['why the Dividend Growth Investment Strategy is much superior to mutual fund investments'], however, is the destruction of the compounding of your investments by the fees and taxes generated in the mutual funds.” Roxann Klugman, The Dividend Growth Investment Strategy p.40 84. “Have you noticed that you can lose a fortune investing in Morningstar Five-Star funds?” Yes, You Can Time the Market, Stein p. 160 85. Apparently, the SEC has discovered “leading Wall Street brokers routinely pocket lucrative fees to tout select funds to clients.” That would not happen in Canada, would it? Report on Business January 14 2004 86. “For decades, mutual fund-fund companies and brokers have been up to things that were ethically suspect.” TheEconomist January 17th 2004 87 . “Sales of mutual funds have long been plagued by conflicts of interest.” Economist January 14 2004 88. Some brokering firms and fund companies have been improperly pushing mutual funds for which sales incentives were at best obliquely disclosed. 89. “The mutual fund industry is indeed the world's largest skimming operation - a US$7-trillion trough from which fund managers, brokers, and other insiders are steadily siphoning off an excessive slice of the nation's household, college and retirement savings.” U.S. Senator Peter Fitzgerald, Rep. Illinois 90. Fund managers charge the gullible masses twice as much to run their in-house funds as they do for the same kind of work done for pension fund managers…more sophisticated folk. Forbes February 12, 2004 91. “mutual funds have long been known to have potential conflicts of interest. On the one hand, fund managers' earnings are related to how much money they manage. On the other, their quest for size can sometimes clash with the financial interests of their investors.” The Economist October 11 2003 p.75 92. In March of 2004 there was a front page story about the record $675 million fine agreed to by companies in the mutual fund industry and New York State Attorney-General Eliot Spitzer. One has to ask why these companies settled and did not go to trial. Perhaps is was because details of the abuses would be revealed.. 93. “dodgy-dealing mutual funds” have been criticised by Warren Buffett. The Economist March 13 2004 94. “Many mutual fund investors aren't getting good value for the fees they pay, a Report on Business analysis finds. In fact, fees often obliterate most of the funds returns.” front page of the Globe and Mail, June 24 2004 95. “With a majority of funds, roughly a full percentage point of the MER is accounted for by the compensation to dealers and financial advisors to sell funds.” Report on Business, June 24 2004 96. I “understand that there are also costs not included in the MER, such as trading commissions”. Report on Business, June 24 2004 97. According to Investment Executive, the average fund turnover rate in 2002 was 96.9%. That's just about the whole portfolio turned over once a year. Think of the tax implications. Think of the transactions costs. Think of the guessing! 98. There was an item in the Wall Street Journal in mid-July 2004 about a settlement between mutual funds companies and U.S. regulators. The mutual fund companies are going to pay $2.4 billion (Yep! That's a 'b'). I ask my self, if the mutual fund companies are will to pay that much to avoid going to court, what are they hiding? 99. Some funds allow their managers to sell short…imagine!

100. “There is a lack of accountability with mutual funds. The selling advisor does not have control over what securities are actually in the fund, and can't be held responsible. The portfolio manager does not have contact with the client and does not know the client's goals and objectives, and is therefore not responsible.” GB, Winnipeg - former funds seller 101. “The mutual fund industry has given a thumbs down to the securities regulator's proposal to improve transparency in the sector.” Keith Damsell, Report on Business August 10 2004 102. “Four of the country's biggest fund companies are under regulatory scrutiny for alleged abusive trading violations in their funds.” Report on Business November 26 2004 - front page 103. “Dividends after mutual funds fees are zero or close to it.” Gary North, Sept 2003 PonziSchemes 104. Our largest mutual funds are controlled by giant financial corporations. These conglomerates, I reckon, are going to be more interested in their return on capital than my return of capital. 105. Mutual funds are drack…a word in Australian English that, in my opinion, fits funds perfectly. 106. Brokerage firms could be taking 'kickbacks' to recommend funds. Edward Jones & Co was forced to publish information about 'revenue sharing' on its web site in 2005 as part of an agreement with regulators because it failed to tell investors about the hidden payments. Financial Post January 15 2005 107. There are managers out there, I'm sure, who beat the market consistently, beyond the probability of luck. Are these amangers going to rent themselves out to my little fund, or are they going to stubbornly guard their obscurity? idea from Against the Gods p.299 108. “a good money manager is extremely difficult to identify” Jeremy Siegel Stocks for the Long Run p 294 109. “mutual funds tend to jump up and down in value with the latest market trends” Lowell Miller The stocks I follow don't. 110. “What a manager does in her or her portfolio is not always in tune with the stated strategy.” The Single Best Investment - Creating Wealth with Dividend Growth 111. “Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.” Standard Life advertisement January 2005 112. At a MoneySaver seminar during the Toronto Financial Forum in 2005, one of the speakers (Harris, I was told), made a most telling comment about why fund managers do not put their own money into their funds: poor performance and excessive fees. Don't you just love it. Money managers not putting their own money into the funds they run. 113. Fund managers have difficulty delivering value-added performance. Wm. Raver, Verizon Communications 114. The 2004 Annual Report of AGF under Statement of Operations (p.53), tells me the dividend income of the AGF large cap dividend fund was $46,437. The expenses of this funds are shown as $38,222. The expenses as a percent of the income is ?%. I can do better than this on my own…easily. Probably just with shares of BCE. 115. Mutual funds don't provide much income. Example: The net investment income shown for each unit of the AGF large- cap dividend fund was 17¢ for the period from September 30 2003 to September 30 2004. (p. 126 annual report) . I'd like income from my investments in retirement. Without income you have to your cannibalize capital. It's not good to cannibalize capital straight away. 116. Systematic withdrawal plans are a precarious way to meet income needs. 117. One of the reasons people lose with mutual funds is because they buy at the wrong time. For instance, in January of 2000, just before the technology boom was peaking, one of the hottest funds being sold was Investors Global Science and Technology fund. Net sales were $143 million. Over the next five years, annual losses were 21% with this technology fund: that's right, minus 21% per year for five years. In contrast, the RBC Dividend fund was among the funds with the highest net redemptions in January of 2000. Over the next five years, this dividend funds had returns of 13.1% a year. Data source: Report on Business March 17 2005 Rob Carrick 118. “Yield may not be very high, because the funds tend to focus on total return” Barron's March 21 2005 119. Lucullan fees. 120. One cannot ignore the fallacy of composition: any individual money manager, through his own effort, can rise above the average, but every money manager, by definition, cannot. 121. Mutual fund money managers seldom follow the buy-and-never-sell approach. “Long-term investors would have been better off had they bought the original S&P 500 firms in 1957 (when I was in Grade 12) and never bought any new firms added to the index. By following this buy-and-never-sell approach, investors would have outperformed almost all mutual funds and money managers over the last half century.” Jeremy Siegel, The Future for Investors p 13 122. “Canada's mutual fund industry has been notoriously resistant to the idea of competing on price” R.O.B. April 26 2005 p.1 123. “The average domestic mutual fund holds about 160 stocks.” Chris Mayer editor of Fleet Street Letter

124. “The pain of watching your mutual fund lag others is exquisite. Ah, but sometimes the fund group brass bump aside the old manager and bring in a brave new soul to save the day. Should you be happy about this rescue? When do you know the new manager is a hero or a zero? Most of the time the new manager is able to do very little good. He or she either is hemmed in by the style dictates of the fund or makes the wrong moves. 'Loser funds so often fail to recover' says industry watcher Roy Weitz, who runs the Web site http://fundalarm.com .” Forbes May 23 2005 125. “IGM Financial Inc's share price performance easily trumps the returns of the mammoth $9.3 billion Investors Dividend Fund.” Report on Business May 30 2005 126. Fund 'lock-up' periods are enforced by redemption fees. 127. “I Still Hate Funds” - headline of Kenneth L. Fisher's Forbes column January 30 2006 128. Published fund performance numbers “overstate average results experienced by investors because loser funds disappear”. Forbes mutual fund guide January 30 2006 p. 120 129. It's more profitable to invest in the fund company…often double digit dividend growth…than to buy the fund. 130. Performance incentives may cause fund managers to incur more risk. 131. “Most good managers have hit rates in the 55 - 60% range which means they make a lot of mistakes…“Jeremy Grantham 132. “Managers are harder to pick than stocks.” Jeremy Grantham, speech in 1997 133. Peter Lynch said it in his 1993 book, “Beating The Street”. On pages 273 and 274 under the Chapter “Treasure In The Backyard”. Referring to buying stocks of mutual fund companies during the market correction of 1987:

“That correction gave me the chance to buy these fellow mutual-fund companies, which I had overlooked before, and at low prices. Here is another of my favourite what-if portfolios: if you had divided your money equally among these eight stocks and held them from the beginning of 1988 to the end of 1989, you would have outperformed 99 percent of the funds that these companies promote. During periods when mutual funds are popular, investing in the companies that sell the funds is likely to be more rewarding than investing in their products. I'm reminded that in the Gold rush the people who sold picks and shovels did better than the prospectors.” 134. This happens all to frequently: On January 6 2006, DDJ's U.S High Yield Fund suspended payment of redemptions. 135. Investor's Group common stock (IGM) had a ten year dividend growth rate to 2004 of 23.8%…per year. Whose making the money in mutual funds, the companies who sell them or the people who are sold funds? 136. Asset mix is largely determined by the fund managers, not me. 137. Some funds short-sell exposure to companies they do not like in an index rather than just underweight them. 138.”There's too much emphasis on short-term performance and too much pressure on portfolio managers to produce immediate returns.” Irwin Michael, portfolio manager ABC Funds, R.O.B. May 11 2006 B17 139. There's no motivating factor in the mutual fund system to make money for the client. 140. The people on Bay Street, and their local representatives who sell funds, are not my friends: the more money they make, the less I do. 141. About all you can do to select a fund is look over your shoulder at the recent past. Future performance is unknown. 142. “Investments without cash flows are risky, uncertain.” Maggie Mahar in Bull: A History of the Bull Market And mutual funds are not noted for their cash flow. 143. “IGM investors' returns leave gains of fund owners in the dust” was the headline over Keith Damsell's column in the Report on business of May 23 2006. His first sentence was: “Buy IGM Financial Inc. shares, sell the Investors Dividend Fund.” 144. ”…ordinary investors are drawn like moths to a flame to those funds or sectors that have had the best recent performance. As a result, they tend to end up buying things that will underperform in due course…“Jonathan Davis May 6 2006 145. Some fund managers try to beat benchmarks by buying stocks which are not in it: that's riskier behaviour. 146. “Researchers can't find the benefits of fund advisers” was the title of James Daw's June 29 column in the Toronto Star. The most common service financial advisers offer involves selecting mutual funds. But, according to a research paper by a team headed by Peter Tufano, a senior associate dean at Harvard Business School, “financial advisers add no value”. 147. “The average mutual fund turns over its portfolio by more than 100% in a year. Think about that. In the course of one year, it sells the equivalent of all the stocks it started out with.” Barron's July 10 2006. The title of the column was: Recipe for Weak Results. It's the “do something” culture. In contrast, 148. we bought our BNS stock in 1990 and still hold it. Our average annual compound rate of return since then is 31.7% (that's every year, note) and our income from this stock is now more than half of what we paid for it…that's right, over 50% yield because of dividend growth. Why would I buy a mutual fund to get a lesser return? That would be a dumb move. 149. That no yield is shown in the daily and weekly mutual fund listing is telling: income from funds must be insignificient. I like income in my retirement, preferably a growing income from common stocks. 150. “Certainly the vast majority of [mutual fund] firms do not disclose to clients how much money their portfolios are making or losing each year. This is scandalous when you think about it…” Rob Carrick, Report on Business, July 27 2006 151. “picking funds on the basis of past preformance, as most people do, is a hazardous business” Jonathan Davis, The Independent September 16 2006 152. “Plenty of mutual funds are run by faceless nobodies who come and go with all the impact of a tree falling in a forest.” Rob Carrick Report on Business October 5 2006 153. “the average holding period” is “just over 1 year for the average mutual fund” James Montier, October 16 2006 154. “According to fund-tracker Lipper, they [large-cap growth mutual funds] had a total return of 0.2% for the year through Sept. 30 [2006].” Forbes, November 27 2006 And this at a time when the Dow was reaching new highs…up over 12,000. 155. “Hedge fund operators get paid better than anyone else - often with a yearly fee of 2% of assets and 20% of any profits.” Laszlo Birinyi, Forbes, November 27 2006 I ask myself, are the really good managers going to stay with mutual funds? 156. Before October 31 2006, many funds invested in income trusts to gee up yield.

157. The average “total shareholder cost” for mutual funds sold in Canada is 4.7% according to a study by A. Khorana of Georgia Institute of Technology, Henri Servaes of London School of Business and Peter Tufano of Harvard Business School. The three studied 46,799 mutual funds in 18 countries. The world wide average “total shareholder cost” is 1.9%. Hence, “We're No. 1” was the headline of Doug Steiner”s column in the Report on Business Magazine of December 2006.

158. “Mutual Funds Stink” was the headline of Laszlo Birinyi's column in the November 27 2006 issue of Forbes. “Don't pay a mutual fund manager a fee to follow the herd”, he said. “Buy stocks on your own.” YES! I love it.